Funding cost is the cost you pay to carry the balance on your credit card. Paying for financial expenses increases the cost you pay for a credit card, especially if we never fulfill our balance. You can avoid financial expenses on almost all credit cards, but it all comes down to the time and amount of your credit card.
How to avoid the cost of financing
Because financing costs are the way a credit card company charges you, an easy way to avoid financial costs is not to balance.
Paying your credit card balance in full each month will prevent your credit card issuer from assigning a fee to your account.
Here’s how it works. Your credit card has a grace period, typically between 21 and 25 days, which is on the front or back of your billing statement. The grace period is your opportunity to pay the full balance and cost of financing. Your statement may even include a disclosure stating the date by which your payment must be received to avoid funding.
Pay the full amount stated on your credit card statement to avoid seeing the financing fee on the next statement. If you pay only a portion of your balance, then your next invoice statement will have a financing charge based on your outstanding balance and any new purchases you make.
How promotional rates affect financial costs
Some credit cards offer an introductory 0% interest rate to attract new customers who want to avoid interest.
During the promotional period, you will generally not receive a financing fee even if you do not pay your full amount. However, after the end of the promotional period, any remaining balance will begin to accrue financial costs in regular APR.
During the promotional period, you can also estimate a non-promotional balance finance fee.
For example, if the promotional rate applies only to balance transfers, then your purchase will be charged a financing fee.
Deferred occupation promotional offers are often promoted similarly to zero percent balance transfers, but are slightly different. A deferred payment off will represent interest on your balance – estimate the full cost of financing from the beginning of the promotional period – if you do not pay the balance by the time the promotional period ends.
Always read the terms of your promotional offers to know if you have to pay the full balance before the end of the promotional period to avoid paying financial costs in the balance. You do not want to be caught with a few months cash back on your balance.
Financial costs cannot be avoided
Usually, you will only receive a grace period when your previous amount has been paid in full and you have started a zero balance calculation cycle. If you had a balance at the beginning of the billing cycle, you may not be able to avoid the cost to finance it. You will need to enter your balance at $ 0 before the grace period is reapplied.
Unfortunately, you may not be able to avoid financial costs for all types of balances.
Balance transfers and cash advances have no grace period, so financing costs start as soon as the balance hits your card. When it comes to these types of balances, the best way to avoid the cost of financing is to stay away from those transactions altogether. The exception is when your credit card has 0% interest rate promotions, but they rarely apply to cash advances.